Wednesday, February 18, 2009

The Next Bubble

by Daniel Bennett

Community and vocational colleges have been one of the few bright spots in terms of affordability over the past few years. Such schools have been able to offer practical job training at a reasonable price (a great opportunity for the non-traditional student to hone his/her skills) because they don't have huge overhead costs and a vastly expensive administrative bureaucracy. Well, those days may be drawing to an end in the near future, thanks to the Obama administration's "economic recovery" bill, which will add nearly $4 billion to the Department of Labor's budget for training and employment. Almost $3 billion of which will support programs of the Workforce Investment Act, which will sign contracts with job training institutions, including community colleges and tech/vocational schools.

According to the VP for government relations at the American Association of Community Colleges, David Baime:

"With the extra cash, the colleges could pay for equipment, curriculum packages, additional faculty members, and other needs. At a time when the colleges are getting budget cuts … getting those expenditures covered by the federal government is really helpful."

At a cursory glance, this may sound like a plausible plan to provide Americans with additional job training, which I concede is of utmost importance. However, there are unintended consequences to every action and history shows us that similar public subsidies for colleges provide little incentive to control costs and hence, tuition. In fact, there is evidence which suggests that subsidies are counter productive in this regard. By expanding operations, community/vocational schools will incur additional residual costs (staff, maintenance, etc) and create a pacifier culture (or what economist Ronald Ehrenberg has termed the Cookie Monster syndrome) in which schools suck up all the resources possible, including in this case massive taxpayer dollars, with reckless abandon. Not to mention the fact that the subsidies will be very difficult to defuse in the future, creating yet another liability for the hyperbolic federal budget.

By passing such legislation, Congress and the new administration have effectively enabled the next bubble -- tuition at community and training colleges. Enhanced bureaucracies and bloated staff salaries are on the horizon for a sector that has traditionally avoided the public resentment of rising tuition.